$15.74 Billion Jet Order By United

April 27, 1989|By Carol Jouzaitis.

United Airlines Wednesday unveiled a $15.74 billion order for 180 Boeing narrow-body jets and options on 190 more, a purchase intended to modernize its fleet and put the carrier back on a growth track.

United`s order included 120 firm orders for twin-engine 737s, with options on 130 more. Deliveries are scheduled for July, 1991, through July, 1995, on firm orders, with optional orders, if exercised, stretching through December, 1998.

The airline also placed 60 firm orders for Boeing`s larger twin-engine 757s and took options on 60 more. Deliveries of 757s are scheduled from February, 1991, through August, 1993, while arrival of optional jets would continue through February, 1996.

``United has made it clear that our airline will grow and compete vigorously and that we will have one of the newest, most modern fleets in aviation,`` United Chairman Stephen Wolf said at a press conference here.

Wolf was joined by Boeing Chairman Frank Shrontz, who said the deal reflected ``continued confidence in Boeing and our products.``

United`s announcement set a record as the largest number of aircraft placed on order with a single manufacturer.

But in total size, the purchase is surpassed by a $17 billion order announced last week by a leasing company, GPA Ltd. of Ireland, for Boeing, McDonnell Douglas and Airbus jets.

Boeing is enjoying a landslide of business as carriers move to modernize their fleets in the face of concerns about accidents involving aging airliners. Boeing said its total backlog stood at 1,519 jets valued at $73 billion slated for delivery through 1998.

United Chairman Stephen Wolf said the Chicago-based carrier planned to order even more jets soon. The carrier was discussing a sizable order for wide-body jets with Boeing and McDonnell Douglas to be announced ``in the not too distant future,`` he said.

United already had 30 757s on order, with deliveries beginning later this year, Boeing said. Chicago-based United, the nation`s largest airline, also has 110 737-300s ordered, of which 56 have been delivered.

The carrier will be able to decide later the mix of the most recent order for the 737 models, which seat from 109 to 145 passengers, depending on the model. The 737s will be powered by General Electric CFM-56 engines.

The new 757s will be powered by Pratt and Whitney 2037 engines. The two-pilot aircraft has a capacity of about 194 passengers.

The narrow-body jets will be used to expand domestic flying, while others would be deployed on Pacific routes and eventually for a planned entry into the European market, Wolf said.

The value of United`s firm orders totals about $7.1 billion. If all 190 options are exercised, the deal`s value would swell to $15.74 billion.

United`s jet purchase was viewed partly as a conciliatory move toward the pilots union, which has refused to grant the company further cost-saving contract concessions and expressed skepticism over the company`s business strategy.

The airline`s growth has lagged behind that of its competitors. But United delayed its aircraft purchase while attempting to cut costs, an effort it has been trying to achieve largely through a new pilots union contract. Negotiations have been underway with the Air Line Pilots Association for 14 months but have yet to produce an agreement.

``I felt we needed to unilaterally demonstrate to pilots our firm commitment to grow the business,`` Wolf said. ``From their point of view, we have been remiss.``

``We are absolutely delighted. The order is long overdue,`` said James Damron, spokesman for the United pilots union. ``We`re very optimistic about the future in a general sense.``

Wolf acknowledged that United`s cost structure is ``still high`` compared with other major carriers. But he said the airline moved ahead with the aircraft purchase anyway because United has been turning away potential passengers because it lacked enough jets.

``For some years United has been losing market share. (This order) will stop that,`` Wolf said.

United`s 410 jets are 13.5 years old on average, which makes it one of the oldest fleets in the industry. The carrier has begun phasing out its 29 stretch model DC-8s and 50 727-100s through sales to other carriers.

The new jets will rapidly reduce the overall age of the fleet while significantly expanding United`s capacity.

But officials declined to predict by how much, saying that an exact schedule for phasing out the older jets hasn`t been determined yet and will depend on economic factors.

``Deliveries will be more rapid than phaseouts,`` Wolf said.

Financing details for the new jets are not yet final, officials said. United owns 80 percent of its jets, a high percentage compared with competitors.

For tax and other financial reasons the carrier has been accepting new planes on operating leases rather than buying them outright and will continue doing so through 1989.

Wolf said United has ``been in quiet discussions`` to possibly buy jets or other unspecified assets from Eastern Airlines, which is selling $1.8 billion in assets through bankruptcy reorganization.

But he added that his strong preference is for United to increase its size internally.